Did Demand Concerns Spark The Biggest Drop In US Oil Rig Count Since 2012?

Tyler Durden's picture

Crude Oil and gasoline prices have been sliding notably recently, but, as Carl Larry, president of Oil Outlooks & Opinions LLC in Houston notes, "the focus is definitely on the U.S. and on concern about demand as we head into the maintenance season." While Brent remains more concerned about Russia and Ukraine, WTI is "focused on supply, demand fundamentals," which with production surging, leaves "everybody wondering if demand will stay steady. People are reducing risk exposure now." What we wonder is - does that explain why the US Oil Rig Count dropped this week by its most since 2012...?

 

 

 

As Crude heads for its longest losing streak since November,

"WTI is weakening because we are approaching refinery turnaround season,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Refinery runs aren’t going to go up much further.”

 

“More oil is coming to market instead of less, and combined with weaker demand that is adding pressure,” said ABN Amro’s van Cleef.

 

“Chinese data has been somewhat disappointing, the euro zone has been weak, and the U.S., while better than Europe, has been mixed.”

Chart: Bloomberg

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Hohum's picture

Maybe.  EKM will chime in and disagree, but at $100/barrel marginal cost far exceeds marginal revenue in the Bakken.  Cash flow is very negative.  Down goes the price, down goes production, down goes Frazier!

BuddyEffed's picture

I'm suspecting it has something to do with dry hole dynamics.

knukles's picture

Lemme tell ya' dat happens when ya get older.

Mrs K just told me I should have an ebola cereal for dinner

TheMerryPrankster's picture

Hence the FEDS liquidity VASeLINe Funds pouring into the markets to keep the rust bucket inching forward for one more day.

New Fed Slogan "just one more day"

it's in needlepoint and hung on every cubicle wall. Right next to the photo of the banker in top hat and monocle butt fucking uncle sam in his full red white and blue regalia.

amusedobserver's picture

More likely it has to do with Siluria Technologies.  Doesn't anyone surf the internet anymore?  There is a lot of the conventional idiocy posted in these comments further down so I'm putting this up here.

Siluria has working technology to convert natural gas to gasoline (and other fuels like diesel and jet fuel) at $1 per gallon.  They have built pilot plants and now demo plants, and plan to build scaled-up commercialization plants in 2017.  They have investment backing from Saudi Aramco investment arm and Kleiner Perkins.

If oil rig count is down maybe it is because we don't need expensive oil anymore.  Natgas is currently selling for about one-sixth the equivalent energy content of oil.  Either oil is going down, or natgas is going up.

http://www.biofuelsdigest.com/bdigest/2014/08/20/saudi-aramco-invests-in...

 

techstrategy's picture

EKM cannot be bothered to consider the shape of the supply curve has changed and that it storage is still small with respect to annual consumption.

ekm1's picture

There could be 15 billion barrels stored around the world since 2010 if not more

chunga's picture

This article of Tyler's has some interesting comments.

As a layman I find something that is funny. If 15 billion barrels can lie around since 2010 in storage why does it begin to immediarely spoil as soon as I put it in *my* fuel tank for use.

If you're not careful it can also ruin certain motors so that's100 percent tard-a-mundo.

ekm1's picture

accumulated since 2010-2011

chunga's picture

I don't doubt you bro but as soon as the muppet consumer buys it; it's just begging to go bad even with additives. We're talking weeks or months not years.

Totentänzerlied's picture

Engineers and chemists please correct me if I'm wrong but pumped crude oil stored at or near ambient pressure and temperature in a more or less air-tight barrel will last a very, very, very long time... it's already been in the ground for tens or hundreds of millions of years. It's the distillate products that spoil quickly.

prmths2's picture

Crude and distilled hydrocarbons are relatively stable. Once you produce motor fuel (e.g., gasoline) the additives (anti-knock compounds, detergents, etc.) generally enhance the ability of the fuel to absorb moisture that can react with the hydrocarbons and additives. Google "ethanol" and "marine engine."

Dave's picture

15 billion barrels in storage? Bullshit.

El Vaquero's picture

And how many years would 15 billion barrels last the world?

 

6 months. 

 

 

ekm1's picture

Enough time to attack Syria and iran

ekm1's picture

The gov will provide rebates and voila, profitable instantly.

As long as technology exists and harm to water supplies and environment is deemed tolerable

El Vaquero's picture

Please get back to me with a working definition of energy.

ekm1's picture

What is the price of gravity?

overmedicatedundersexed's picture

with all the fiat given out by the fed, this is the best economy it bought??

my area is in a depression, closed business space abounds, yet new is built, but not much..a few projects mostly tied to .gov via university and schools. yet the fiat/welfare does reduce the impact of no jobs, and lost manufactoring long gone overseas, thanks nafta and the idiots traitors in dc and cfr.

TheMerryPrankster's picture

energy = the ability to do work

5th grade science class

ekm1's picture

That is a pile of excrement.

Rig count is down because there is so much oil in storage that it makes no more sense to expand extraction until the hyper super glut in storage is dumped into the consumption market and consumed

 

This will practically be a margin call on the financial system, hence Triple Lehman

fonzannoon's picture

so there is an abundance of oil, which will be dumped on the consumer, substantially lowering prices, helping out margins of a lot of companies and giving consumers a needed break, and this will cause the banks to fail?

knukles's picture

It's down because of all the electric cars, bitchez.

I Love Governor MoonBeam

Aaaaarrraaaggghhhhhh

Fuck this shit... yesterday I washed baseboards and walls to maintain my sanity.... tonight I'm gonna go watch Teddy Atlas on Firday Night Fights... some of his disjointed ramblings are better than drugs... bam, pow, bam, bam ,and duh uppah cut and he's gone.  But I wuz talkin to Ceasar's mom duh uddah day an she wuz must worried about hiz eahs.  Nopt his brain becuz dat wuz already gone frum dah Spencer fightn and she said there'd be nuffin' wrong wid him fitin' Goglvnick because dere wuz no brainz lef ta smoosh and so when we wuz talkin' about is eahz...

ekm1's picture

Yes. Because primary dealers, warren buffett and others have pledged oil as collateral of interest rate swaps

knukles's picture

Oh, that's kinda greasy

ekm1's picture

I'm not sure what you mean, but I estimate that a minimum of 4-6 billion barrels are in storage and not included in calculations, which is about 1 year of US consumption

It could be as hight 15 billion barrels in storage around the world right now.

Escrava Isaura's picture

ekm,

4-6 billion in storage?

 

ekm1's picture

Yes. As high as 15 billion barrels around the world, maybe more

Escrava Isaura's picture

What are you talking about?

 

ekm1's picture

Derivatives and war preparations since 2010-2011

Escrava Isaura's picture

So, you are telling us that:

a) Derivatives are leverage on 4-6 billion barrels of oil in the US?

b) There are 4-6 billion barrels right now stored somewhere in the US?

If you are telling us ‘a’ I can see that. But,

If it is ‘b’ you have a problem.

 

Ron Paterson: The decline is primarily because of the price of gas. Rigs are switching from gas to oil.

http://peakoilbarrel.com/texas-rrc-report-russia/

 

As you can see, we have a conundrum here.

ekm1's picture

I am not trying to convice anybody

That is my opinion.

 

you ask questions, I answer

Escrava Isaura's picture

ekm1,

Please, be more careful with your opinions

These types of 'opinions' needed to be backed up by empirical evidence and hard facts.

 

And these are very accessible. Thanks to the internet.

 

By the way, you noticed that people were reading you, didn't you? So your credibility too is at stake.

ekm1's picture

No I don't have to be careful with opinions

 

There is no such thing as 'evidence'.

Everybody looks for evidence.

 

Why would somebody bound in an interest rate swap or preparing for war profide real data to the world?

 

 

El Vaquero's picture

You're making a big deal over a mysterious 6 month global supply of a substance which your food depends on without anything to back up your claims. 

ekm1's picture

Yes.

Tell me anything that can be backed up with any real data?

El Vaquero's picture

A working definition of energy.  You can do some research, then go into a lab and test it yourself.

bid the soldiers shoot's picture

'Hyper super glut' is a fancy expression for 'the recovery is in the toilet.'

ekm1's picture

Derivatives and war preparations since 2011.

fonzannoon's picture

If gdp was really negaative 5% or whatever...and it very well may be, what does that do to oil demand?

ekm1's picture

No, it's the opposite

Demand for oil never goes down, people consume whatever is available

 

Oil restricts economic expansion, not vice versa.

fonzannoon's picture

so the demand for oil is constant, but it's the availability that is the issue, so we have a whole boatload (pun intended) offshore, which we will dump on the market, substantially lowering prices. Okay...so in terms of days/months, how much oil is presently being held off the market, and at what price was that oil purchased? Who would be happy to dump it on the market it and eat that loss?

ekm1's picture

I think there are 4-6 billion barrels stored in USA and 15-25 billion stored worldwide

 

Margin call will force weak hands to sell, to cover margin.

 

Congress will order CFTC and enforce high initial margins of oil trading.

 

Physical threats to those who refuse to the point of assassinations if they actually do refuse.

 

Same as in 2008. Nothing different

fonzannoon's picture

we have embarked on 4 trillion in QE since 2008. So we get a triple lehman and we just do another 4 trillion?

You know if it was not for you I would have to talk to my wife most nights. I really can't thank you enough.

ekm1's picture

another 4 trillion will make the world instantly dump usd and go full barter.

World trade will collapse

fonzannoon's picture

I thought you said same as 2008. That sounds a bit different

Totentänzerlied's picture

Then you don't believe anyone is sincere in their SDR overtures (and assuming all major commodities would very quickly be repriced into SDR)?

Real barter, like gold/silver trade settlement, leaves vastly less room for the rather large class of parasite-rentier-middlemen...

ReactionToClosedMinds's picture

"You know if it was not for you I would have to talk to my wife most nights. I really can't thank you enough."   <<< a gem

 

only someone who has been married 25+ years can laugh hilariously at your 'insightful' remark.  Find humor anywhere and anyhow .... the key to  sanity